Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.

Yes
x
No £

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).

Yes £
No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and
smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £

Accelerated filer £

Non-accelerated filer £

Smaller reporting company x

(Do not check if a smaller reporting
company)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

Yes £
No
x

The number of shares outstanding of each of the issuers classes of common equity, as of
November 12, 2009 is as follows:

Class of Securities

Shares Outstanding

Common Stock, $0.001 par value

22,452,745

TABLE OF CONTENTS

PART I

Page

Item 1.

Financial Statements

1

Item 2.

Managements Discussion and Analysis of
Financial Condition and Results of Operations

26

Item 3.

Quantitative and
Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

40

PART II

Item 1.

Legal Proceedings

41

Item 2.

Unregistered Sales of
Equity Securities and Use of Proceeds

41

Item 3.

Defaults Upon Senior Securities

41

Item 4.

Submission of Matters to
a Vote of Securities Holders

41

Item 5.

Other Information

41

Item 6.

Exhibits

42

i

PART I.
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Unaudited Condensed Consolidated
Balance Sheets as of September 30, 2009 and December 31, 2008

2

Unaudited Condensed Consolidated Statements of Operations
for the Three Months and Nine Months Ended September 30, 2009 and 2008

Organization and Description of
BusinessChina TransInfo Technology Corp., or the Company, we, or us,
was originally incorporated in Nevada on August 3, 1998, under the name R &
R Ranching, Inc. to breed bison. In about March 2003, R & R Ranching Inc.
sold its bison to Blue Sky Bison Ranch, Ltd.

The Company has experienced several
corporate name changes: GloTech Industries, Inc. in March 2003, Intra-Asia
Entertainment Corporation in December 2003, and China TransInfo Technology Corp.
in August 2007.

On May 14, 2007, the Company entered
into a share exchange agreement with Cabowise International Ltd., or Cabowise, a
British Virgin Islands company, the stockholders of Cabowise, Weicheng
International Inc. and Foster Growth Ltd. Pursuant to the share exchange
agreement, the Company, among other things, agreed to issue to the stockholders
of Cabowise an aggregate of 10,841,491 shares of its common stock in exchange
for all of the issued and outstanding capital stock of Cabowise. In addition,
Cabowise agreed to assign its option to purchase a majority equity interest in
Beijing PKU Chinafront High Technology Co., Ltd, or PKU, to the Companys
indirect Chinese subsidiary Oriental Intra-Asia Entertainment (China) Limited,
or Oriental Intra-Asia.

Cabowise does not have any subsidiaries
nor is it engaged in any business. Cabowises sole asset was its option to
purchase an eighty-five percent (85%) interest in PKU,or the PKU Option.
Pursuant to the share exchange agreement, Cabowise agreed to assign the PKU
Option to Oriental Intra-Asia. On May 14, 2007, Cabowise, the Company and
Oriental Intra-Asia entered into an assignment and assumption agreement whereby
Cabowise assigned the PKU Option to Oriental Intra-Asia. On May 14, 2007,
Oriental Intra-Asia exercised the PKU Option, and Oriental Intra-Asia became the
owner of an eighty-five percent (85%) equity interest in PKU.

The exchange of shares has been
accounted for as a reverse acquisition under the purchase method of accounting
since the shareholders of the PKU obtained control of the consolidated entity.
Accordingly, the merger of the two companies has been recorded as a
recapitalization of PKU, with PKU being treated as the continuing entity. The
historical financial statements presented are those of PKU. The continuing
company has retained December 31 as its fiscal year end.

During August 2007, the Company
completed a 1-for-7.5 reverse split of all issued and outstanding shares of
common stock. The capital stock accounts and all share data in this report give
effect to the reverse split, applied retroactively, for all periods presented.

PKU is in the business of providing
Geography Information System, or GIS, application services to the Chinese
governments in the sectors of Transportation, Land and Resources, and Digital
City. PKU offers GIS application services that cover GIS system planning,
deployment, system construction, data testing, system audit and optimization,
users manual and customer training, through self-developed GIS platform
software products applicable for two-dimension and three-dimension system
models. PKU was incorporated in Beijing, China on October 30, 2000.

In addition to PKU, the Company has the
following operating variable interest entities:

Beijing Tian Hao Ding Xin Science and Technology Co., Ltd., or Beijing
Tian Hao, was established on December 31, 2005 with registered capital of RMB
5 million. Beijing Tian Hao is engaged in the business of GIS application
research and development.

Beijing Zhangcheng Science & Technology Co., Ltd., or Beijing
Zhangcheng Science, was established on October 12, 2007 with registered
capital of RMB 10 million. Beijing Zhangcheng is engaged in the business of
GIS application development for real time traffic information reporting.

Beijing Zhangcheng Culture and Media Co., Ltd., or Zhangcheng Media, was
set up on June 8, 2008 with registered capital of RMB 5 million. Zhangcheng
Media is mainly engaged in taxi media advertising business.

Shanghai Yootu Information Technology Co., Ltd., or Shanghai Yootu, was
established on February 6, 2007 with registered capital of RMB 2 million.
Shanghai Yootu is engaged in the business of real time traffic data
application research and development.

Xingjiang Zhangcheng Science and Technology Co., Ltd., or Xinjiang
Zhangcheng, was established on January 25, 2008 with registered capital of RMB
10 million. Xinjiang Zhangcheng is mainly engaged in taxi media advertising
business.

China TranWiseway Technology Co., Ltd., or China TranWiseway, was
established on June 28, 2004 with registered capital of RMB 0.5 million. China
TranWiseway is engaged in the business of traffic surveying technology
applications.

Dalian Dajian Zhitong Information Service Ltd., or Dajian Zhitong, was
established on June 9, 2006 with registered capital of RMB 1 million. Dalian
Dajian is mainly engaged in taxi media advertising business.

On September 8, 2009, Mr. Shudong Xia,
Chairman and Chief Executive Officer of the Company, executed agreement to
acquire a 35.17% equity interest in Beijing UNISITS Technology Co. Ltd., or
UNISITS from Unisplendour Corporation Limited, or Unisplendour, with a cash
payment of RMB 44.4 million (approximately $6.53 million). Subsequently, on
September 8, 2009, China TransInfo Technology Group Co., Ltd., or the Group
Company, a variable interest entity of the Company entered into an option
agreement with Mr. Xia, under which Mr. Xia granted to the Group Company a
perpetual option to acquire all of Mr. Xia's equity interest in UNISITS for RMB
44.4 million, which is the exercise price. The exercise price of the option was
prepaid upon the granting of the option. Concurrently, the Group Company
acquired from Mr. Xia the rights to his share of all future UNISITS dividends or
other distributions. Mr. Xia pledged his equity interest in UNISITS to the Group
Company for five years. The Group Company expects to exercise the option and
take title to the equity interest now held by Mr. Xia upon the expiration of the
five-year term of the pledge agreement when the option first becomes
exercisable. In September 2009, the Group Company and four of five board
directors of UNISITS entered into an Acting in Concert Agreement. The agreement
allows the Group Company to govern the financial and operating policies of
UNISITS and therefore to obtain the control of UNISITS. As a result, UNISITS
became a variable interest entity of the Group Company and its financials has
been included in the Companys consolidated financial statements.

UNISITS is a company organized on
November 8, 2002 under the laws of the People's Republic of China, engaging in
the business of providing traffic engineering E&M systems, intelligent
transportation products, and intelligent transportation services (ITS) to the
domestic expressway, railway, and urban transportation markets.

Basis of
PresentationThe accompanying unaudited interim
consolidated financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and generally accepted
accounting principles for interim financial reporting. Accordingly, they do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for fair presentation have been included. The accompanying
condensed consolidated financial statements should be read in conjunction with
the Companys annual report on Form 10-K for the year ended December 31, 2008.
Operating results for the nine-month period ended September 30, 2009 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2009.

On February 3, 2009, the Company,
through its indirect Chinese subsidiaries, Oriental Intra-Asia and PKU, entered
into a series of equity transfer agreements with the Group Company, a company
incorporated under Chinese law, pursuant to which the Company transferred all of
its indirect equity interests in PKU and PKU's subsidiaries to the Group
Company. The main purpose of this restructuring is to allow the Company to
engage in online services, taxi advertising, and security and surveillance
related business in China in which companies with foreign ownership, like the
Company and its subsidiaries, are either prohibited or restricted from operating
under the current applicable Chinese laws and regulations. Through the
contractual or variable interest entity, or VIE, arrangements, the Company
maintains substantial control over the VIE Entities' daily operations and
financial affairs, election of their senior executives and all matters requiring
shareholder approval. Furthermore, as the primary beneficiary of the VIE
Entities, the Company is entitled to consolidate the financial results of the
VIE Entities in its own consolidated financial statements under ACS 810
(formerly FASB Interpretation No. 46R "Consolidation of Variable Interest
Entities," or FIN 46R).

Use of EstimatesThe
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates include accrued warranty
costs, as well as revenue and costs recorded under the percentage-of-completion
method. Actual results could differ from those estimates.

Cash EquivalentsThe
Company classifies all highly liquid investments purchased with a maturity of
three months or less as cash equivalents.

Accounts
ReceivableAccounts receivable are carried at original invoice amount
less an estimate for doubtful receivables based on a review of all outstanding
amounts at year end. Management determines the allowance for doubtful accounts
by using historical experience applied to an aging of accounts. Trade
receivables are written off when deemed uncollectible. Recoveries of trade
receivables previously written off are recorded when received. Allowance for
doubtful accounts amounted to $32,395 and $32,439 at September 30, 2009 and
December 31, 2008, respectively.

Long-Term Investment The
Company uses the cost method of accounting for investments in companies that do
not have a readily determinable fair value in which it holds an interest of less
than 20% and over which it does not have the ability to exercise significant
influence. For entities in which the Company holds an interest of greater than
20% or in which the Company does have the ability to exercise significant
influence, the Company uses the equity method.

Property and
EquipmentProperty and equipment are recorded at cost, less accumulated
depreciation. Depreciation is provided for using straight-line methods over the
estimated useful lives of the respective assets, usually three to seven years.

Revenue RecognitionMost
of the Companys revenues are on contracts recognized using the
percentage-of-completion method, measured by the ratio of costs incurred to date
to estimated total costs for each contract. Contract costs include all direct
material and labor costs and those indirect costs related to contract
performance, such as supplies and travels. General and administrative costs are
charged to expense as incurred. Losses on contracts are recorded in full as they
are identified.

For taxi media advertising revenue, the
Company recognizes deferred revenue when cash is received, but the revenue has
not yet been earned. Taxi media advertising revenue is billed to the customer
and recognized when the advertisement is published.

Research and
DevelopmentResearch and development costs represent the costs of
designing, developing and testing products and are expensed as selling, general
and administrative expenses as incurred if not meeting capitalization
requirements. Such costs of software projects that successfully passed
technological feasibility tests are capitalized and amortized when place in
service.

Share-Based PaymentsThe
Company adopted ASC 718 (formerly SFAS No. 123(R), Share-Based Payment),
requires all entities to recognize compensation expense in an amount equal to
the fair value of share based payments made to employees, among other
requirements. Under the fair value based method, compensation cost is measured
at the grant date based on the fair value of the award and is recognized on a
straight-line basis over the award vesting period. Accordingly, share based
payments issued to officers and directors are measured at fair value and
recognized as expense over the related vesting periods.

Income TaxesThe Company
accounts for income taxes in accordance with ASC 740 (formerly SFAS No. 109,
Accounting for Income Taxes), which requires that the Company recognize
deferred tax liabilities and assets based on the differences between the
financial statement carrying amounts and the tax basis of assets and
liabilities, using enacted tax rates in effect in the years the differences are
expected to reverse. Deferred income tax benefit (expense) results from the
change in net deferred tax assets or deferred tax liabilities. A valuation
allowance is recorded when, in the opinion of management, it is more likely than
not that some or all of any deferred tax assets will not be realized.

Impairment of Long-Lived
AssetsThe Company accounts for the impairment and disposition of
long-lived assets in accordance with ASC 360, (formerly SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived Assets). The Company
periodically evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may not be
recoverable. If the estimated future cash flows (undiscounted and without
interest charges) from the use of an asset were less than the carrying value, a
write-down would be recorded to reduce the related asset to its estimated fair
value.

The assumptions used by management in
determining the future cash flows are critical. In the event these expected cash
flows are not realized, future impairment losses may be recorded. Management has
determined that no impairments of long-lived assets currently exist.

Issuance of Shares by
SubsidiariesSales of stock by a subsidiary is accounted for in
accordance with ACS 810, (formerly Staff Accounting Bulletin Topic 5H,
Accounting for Sales of Stock by a Subsidiary). The Company has adopted the
capital transaction method to account for subsidiary stock sales. Accordingly,
increases and decreases in the Companys share of its subsidiarys net equity
resulting from subsidiary stock transactions are recorded on the Consolidated
Balance Sheets and Consolidated Statements of Stockholders Equity as increases
or decreases to Additional paid-in capital.

Concentrations of Credit
RiskFinancial instruments that subject the Company to credit risk
consist primarily of accounts receivable, which are concentrated in a small
number of customers in the Chinese governments. The Company performs ongoing
credit evaluations of its customers. For the nine months ended September 30,
2009, the Company did not incur any bad debt expenses.

Statement of Cash
FlowsIn accordance with ACS 230 (formerly SFAS No. 95, "Statement of
Cash Flows"), cash flows from the Company's operations are based upon the local
currencies. As a result, amounts related to assets and liabilities reported on
the statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet.

Translation
AdjustmentThe Renminbi,or RMB, the national currency of the PRC, is the
primary currency of the economic environment in which the operations of China
IRAE are conducted. The Company uses the United States dollar, or theU.S.
dollars, for financial reporting purposes.

In accordance with ASC 230 (formerly
FAS No. 52, Foreign Currency Translation), the Companys results of
operations and cash flows are translated at the average exchange rates during
the period, assets and liabilities are translated at the exchange rates at the
balance sheet dates, and equity is translated at the historical exchange rates.
As a result, amounts related to assets and liabilities reported on the
consolidated statements of cash flows will not necessarily agree with changes in
the corresponding balances on the consolidated balance sheets.

As of September 30, 2009 and December
31, 2008, the exchange rates between RMB(¥) and the USD were RMB¥1 = USD$0.1467
and RMB¥1 = USD$0.1467, respectively. The weighted-average rates of exchange
between RMB and USD were RMB¥1 = USD$0.14659 and RMB¥1 = USD$0.14415,
respectively. Total translation adjustment recognized as of September 30, 2009
and December 31, 2008 is $2,111,304 and $2,499,893, respectively.

Comprehensive
IncomeComprehensive income includes accumulated foreign currency
translation gains and losses. The Company has reported the components of
comprehensive income on its statements of stockholders equity.

Fair Value of Financial
Instruments The carrying amounts of cash and cash equivalents, accounts
receivable, deposits and accounts payable approximate their fair value because
of the short maturity of those instruments.

The carrying amounts of the Company's
long-term debt approximate their fair value because of the short maturity and/or
interest rates which are comparable to those currently available to the Company
on obligations with similar terms.

New Accounting Pronouncements

In June 2009, the FASB issued
Accounting Standards Update No. 2009-01, Generally Accepted Accounting
Principles (ASC Topic 105) which establishes the FASB Accounting Standards
Codification (the Codification or ASC) as the official single source of
authoritative U.S. generally accepted accounting principles (GAAP). All
existing accounting standards are superseded. All other accounting guidance not
included in the Codification will be considered non-authoritative. The
Codification also includes all relevant Securities and Exchange Commission
(SEC) guidance organized using the same topical structure in separate sections
within the Codification.

Following the Codification, the Board
will not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates (ASU) which will serve to update the Codification, provide
background information about the guidance and provide the basis for conclusions
on the changes to the Codification.

The Codification is not intended to
change GAAP, but it will change the way GAAP is organized and presented. The
Codification is effective for our third-quarter 2009 financial statements and
the principal impact on our financial statements is limited to disclosures as
all future references to authoritative accounting literature will be referenced
in accordance with the Codification. In order to ease the transition to the
Codification, we are providing the Codification cross-reference alongside the
references to the standards issued and adopted prior to the adoption of the
Codification.

In April 2009, the FASB issued FASB
Staff Positions FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments (ASC Topic 320-10-65). This update provides
guidance for allocation of charges for other-than-temporary impairments between
earnings and other comprehensive income. It also revises subsequent accounting
for other-than-temporary impairments and expands required disclosure. The update
was effective for interim and annual periods ending after June 15, 2009. The
adoption of FAS 115-2 and FAS 124-2 did not have a material impact on the
results of operations and financial condition.

In April 2009, the FASB issued FSP SFAS
107-1 and APB 28-1, Interim Disclosures About Fair Value of Financial
Instruments (ASC Topic 320-10-65). This update requires fair value disclosures
for financial instruments that are not currently reflected on the balance sheet
at fair value on a quarterly basis and is effective for interim periods ending
after June 15, 2009. The Companys financial instruments include cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses and notes
payable. At September 30, 2009 and December 31, 2008 the carrying value of the
Companies financial instruments approximated fair value, due to their short term
nature.

In May 2009, the FASB issued SFAS No.
165, Subsequent Events (ASC Topic 855). This guidance is intended to establish
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or available
to be issued. It is effective for interim and annual reporting periods ending
after June 15, 2009. The adoption of this guidance did not have a material
impact on our consolidated financial statements. The Company evaluated all
events and transactions that occurred after September 30, 2009 up through
November 10, 2009. During this period no material subsequent events came to our
attention.

In June 2009, the FASB issued SFAS No.
167, Amendments to FASB Interpretation No. 46(R) (ASC Topic 810). This updated
guidance requires a qualitative approach to identifying a controlling financial
interest in a variable interest entity (VIE), and requires ongoing assessment of
whether an entity is a VIE and whether an interest in a VIE makes the holder the
primary beneficiary of the VIE. It is effective for annual reporting periods
beginning after November 15, 2009. We are currently evaluating the impact of the
pending adoption of SFAS No. 167 on our consolidated financial statements.

In August 2009, the FASB issued ASU
2009-05, which provides additional guidance under the Fair Value Measurements
and Disclosures Topic, ASC 820-10 Application to Liabilities. The guidance
clarifies that the quoted price for the liability when traded as an asset in an
active market is a Level 1 measurement, when no adjustment to the quoted price
is required. In the absence of a Level 1 (quoted price) measurement, an entity
must use one or more valuation techniques to estimate fair value in a manner
consistent with the principles in ASC 820. We do not expect adoption of this
guidance to have an impact on the Companys consolidated financial statements.

In October 2009, the FASB issued ASU
2009-14 which amended the accounting requirements under the Software Topic, ASC
985-605 Revenue Recognition. The objective of this update is to address the
accounting for revenue arrangements that contain tangible products and software.
Specifically, products that contain software that is more than incidental to
the product as a whole will be removed from the scope of ASC subtopic 985-605
(previously AICPA Statement of Position 97-2). The amendments align the
accounting for these revenue transaction types with the amendments under ASU
2009-13 mentioned above. The guidance provided within ASU 2009-14 is effective
for fiscal years beginning on or after June 15, 2010 and allows for either
prospective or retrospective application, with early adoption permitted. We are
currently evaluating the impact that adoption of this guidance will have on our
consolidated financial statements.

2.

RESTRICTED CASH

The Companys restricted cash balances
at September 30, 2009 and December 31, 2008 were as follows:

The costs and estimated earnings on uncompleted contracts
were as follows:

September 30, 2009

December 31, 2008

Costs incurred on
uncompleted contracts

$

53,010,137

$

16,464,203

Estimated earnings on uncompleted
contracts

52,140,216

20,749,561

105,150,353

37,213,764

Less: billings to date

89,149,710

26,148,450

Total

$

16,000,644

$

11,065,314

The costs and estimated earnings on
uncompleted contracts are included in the accompanying balance sheets under the
following captions:

September 30, 2009

December 31, 2008

Costs and estimated earnings in excess of
billings on uncompleted contracts

$

28,066,671

$

11,912,285

Billings in excess of costs and estimated earnings on
uncompleted contracts

(12,066,027

)

(846,971

)

Total

$

16,000,644

$

11,065,314

4.

PROPERTY AND EQUIPMENT

The following is a summary of the Companys property and
equipment:

September 30,2009

December 31,2008

Automobiles

$

1,541,910

$

454,659

Machinery and equipments

8,851,054

5,640,958

Furniture and fixtures

166,581

147,957

Prepayment for building

-

1,249,745

Work-in-progress

1,019,305

2,676,864

Total

11,578,850

10,170,183

Less: accumulated depreciation

(1,792,706

)

(296,178

)

Total Property and Equipment, net

$

9,786,144

$

9,874,005

On June 2, 2007, the Company entered
into an agreement to purchase an office building for approximately $1,336,000.
The Company made prepayments totaling RMB 8,304,050 or $1,218,204,pursuant to
the agreement. During the nine months ended September 30, 2009, the agreement
was mutually terminated and the prepaid amounts were returned to the Company in
full.

The Company entered an agreement with
Taxi Association of City of Urumqi for installation of a global positioning
system, or GPS, control system. Pursuant to the agreement, the Company will
install GPS Control Terminals on the 5,220 rental and taxi cars in the city of
Urumqi in exchange for rights of interior or exterior advertisements on each
taxis rear window, top light (LED display) and interior. According to the
agreement, the Company began to operate the system on October 1, 2007 for a
period of 15 years. Costs incurred for installed terminals that have been
inspected and accepted were recorded as Machinery and Equipment and are
depreciated over a 7-year period. Costs incurred for uninstalled terminals and
installed terminals that have not been inspected and accepted were recorded as
work-in-progress.

In addition, on March 31, 2008, the
Company signed the Agreement for Installation of Taxi GPS Monitoring System with
the Urumqi City Transportation Bureau, or the Transportation Bureau, which is
the higher management authority of the Taxi Association of City of Urumqi. The
agreement reconfirmed the Companys responsibility for providing to the
Transportation Bureau's Passenger Transport Office with equipment for LED-based GPS monitoring, network hardware, GPS
monitoring platform, and LED-based information release platform and
software in exchange for the 15 years taxi advertising rights. The
Transportation Bureau further guarantees that the Company will be its
exclusive cooperation partner for a period of 15 years. No changes related
to this guaranty will be made during the 15-year period.

The Company signed a contract jointly with the Huhhot
Comprehensive Traffic Information Center and the Huhhot Department of
Transportation Administration on January 28, 2008 to exclusively invest in
and construct the LED stripe screen advertisement broadcasting system for
taxis (LSABS) in the city of Huhhot. The contract is for a period of 15
years, and the Company will provide funding for LED strip screens and taxi
rooftop light alterations to construct the citys Taxi Advertising and
Information Release System. Costs incurred for installed terminals that
have been inspected and accepted were recorded as Machinery and Equipment
and depreciated over a 7-year period. Costs incurred for uninstalled
terminals and installed terminals that have not been inspected and
accepted were recorded as Work-in-progress.

Depreciation and amortization expenses during the nine
months ended September 30, 2009 and 2008 totaled $881,349 (of which
$60,905 was related to intangible assets), and $105,261,
respectively.

5.

INTANGIBLE ASSETS

The Companys intangible assets as of September 30, 2009
and December 31, 2008 are summarized as
follows:

September 30, 2009

December 31, 2008

Existing technology

$

174,573

$

174,573

ETC and GPS technologies

3,475,997

1,339,061

Highway Monitoring and
Control technology

242,055

-

Contract backlogs

293,400

-

Less: accumulated
amortization

(88,096

)

(22,827

)

Total

$

4,097,929

$

1,490,807

(1) Existing Technology

China TranWiseway, one of the Companys
VIE entities, internally developed the Traffic Volume Long-Distance Monitoring
and Data Center Platform technology. The useful life of the technology is
estimated at 10 years.

(2) ETC and GPS Technologies

The Company purchased software from
third parties for total cash consideration of $900,431. This software was
integrated into an Electrical Toll collection, or ETC, non-stop toll system and
GPS technology. The Company plans to distribute fully integrated ETC systems
with both hardware and software included. The estimated useful life of the
technology is for 10 years.

As of September 30, 2009, the Company
capitalized research and development costs of $2,497,766 after establishing
technical feasibilities for its real time traffic information application
software (GPS Technology). Amortization of the real time traffic information
technology will not start until the application is completely developed.

UNSITS, a VIE entity of the Company,
possesses the Highway Monitoring and Control technology. The Company amortizes
such asset on a straight-line basis over 10 years.

(4) Contract Backlogs

UNISITS has certain intangible assets
relating to earnings-generating service contracts that were independently
valuated as an intangible asset for the equity acquisition purposes. The Company
amortizes such asset on a straight-line basis over 2 years.

6.

GOODWILL

The Company recorded ¥6,703,104 or $983,345, ¥1,293,441
or $189,748, ¥13,101,047 or $1,921,924, and ¥45,941,729 or $6,739,651 in
goodwill in connection with its acquisitions (see Note 8) of equity of
China TranWiseway, Dajian Zhitong, Shanghai Yootu, and UNISITS,
respectively.

In accordance with the provisions of ASC 350-20 (formerly
SFAS No. 142, "Goodwill and Other Intangible Assets", the Company
performed the goodwill impairment tests. The results of the tests
indicated that no impairment loss was probable because the implied fair
value of goodwill related to the equity purchased exceeded the book value
of the goodwill. The Company performs its annual impairment test as of the
last day of the fiscal year. These impairment tests must be performed more
frequently if there are triggering events.

7.

NOTES PAYABLE

On June 17, 2008, the Company entered into a loan
agreement with a commercial bank in the amount of RMB 20,000,000, or
$2,930,000. The loan bears an interest rate of 6.372% per annum. The loan
was paid off when the agreement expired on June 17, 2009.

On June 22, 2009, the Company renewed the above loan
agreement in the amount of RMB 20,000,000, or $2,934,000. The loan had an
initial annual interest rate of 5.31%, which was floating based on
interest rates determined by the Peoples Bank of China from time to time
and it expires on June 22, 2010.

On May 27, 2009, UNISITS entered into a loan agreement
with a commercial bank in the amount of RMB 1,000,000, or $146,700.
Interest rate is variable at 10% above the benchmark interest rate
determined by the Peoples Bank of China from time to time. The loan
expires on May 27, 2010.

On September 29, 2009, the Company entered into a loan
agreement with a commercial bank in the amount of RMB 30,000,000, or
$4,401,000. The loan had an initial annual interest rate of 5.31%, which
was floating based on interest rates determined by the Peoples Bank of
China from time to time and it expires on September 29, 2010.

During 2008, the Company acquired 70%, 85%, and 100%
ownership of China TranWiseway, Dajian Zhitong, and Shanghai Yootu,
respectively. Goodwill resulting from the acquisitions was recorded at
$982,005, $189,489, and $1,919,303 for China TranWiseway, Dajian Zhitong,
and Shanghai Yootu, respectively.

On September 8, 2009, Shudong Xia,
Chairman, CEO and President of the Company, entered into an equity transfer
agreement with Unisplendour, pursuant to which Mr. Xia acquired 35.17% of the
equity interest in UNISITS from Unisplendour for a cash price of RMB 44, 400,000
(approximately $6.53 million). UNISITS is a company organized under the laws of
the People's Republic of China, engaging in the business of providing traffic
engineering E&M systems, intelligent transportation products, and
intelligent transportation services (ITS) to the domestic expressway, railway,
and urban transportation markets.

Subsequently, on September 8, 2009, the
Group Company entered into an option agreement with Mr. Xia, under which Mr. Xia
granted to the Group Company a perpetual option to acquire all of Mr. Xia's
equity interest in UNISITS for RMB 44.4 million, which is the exercise price.
Concurrently, the Group Company acquired from Mr. Xia the rights to his share of
all potential UNISITS dividends or other distributions. Mr. Xia pledged his
equity interest in UNISITS to the Group Company for five years. The Group
Company expects to exercise the option and take title to the equity interest now
held by Mr. Xia upon the expiration of the five-year term of the pledge
agreement when the option will first become exercisable. In September 2009, the
Group Company and four of five board directors of UNISITS entered into an Acting
in Concert agreement. The agreement allows the Group Company to govern the
financial and operating policies of UNISITS and therefore to obtain the control
of UNISITS. As a result, UNISITS became a variable interest entity of the Group
Company and its financials has been included in the Companys consolidated
financial statements. As of September 30, 2009, 50% of the exercise price, or
RMB 22, 200,000 has been paid to Unisplendour. The rest 50% of the exercise
price will be paid within 45 days after the completion of registration of Mr.
Xia as a shareholder of UNISITS with the relevant governmental authority in
China.

The fair value of UNISITS at the
acquisition date is allocated as follows:

Currency

In RMB

Exchange Rate

In USD

Net tangible assets

¥

76,648,271

0.1467

$

11,244,302

Highway Monitoring and Control
technology

1,650,000

0.1467

242,055

Contract backlogs

2,000,000

0.1467

293,400

Goodwill

45,941,729

0.1467

6,739,651

Total fair value at
date of acquisition

¥

126,240,000

$

18,519,408

CTFO ownership

35.17%

¥

44,400,000

0.1467

$

6,513,480

Noncontrolling interest

64.83%

81,840,000

0.1467

12,005,928

Total

100.00%

¥

126,240,000

$

18,519,408

The following table summarizes what the results of operations
of the Company would have been on a pro forma basis for the nine months ended
September 30, 2009, if the acquisition had occurred prior to the beginning of
the period. These results do not purport to represent what the results of
operations for the Company would have actually been or to be indicative of the
future results of operations of the Company.

ASC 815-40 (formerly Accounting for Derivative
Financial Instruments Indexed to and Potentially Settled in, a Companys
Own Stock, or EITF 00-19), provides criteria for determining whether
freestanding contracts that are settled in a companys own stock,
including common stock warrants, should be designated as either an equity
instrument, an asset or as a liability under SFAS No. 133. Under the
provisions of ASC 815-40 (formerly EITF 00-19), a contract designated as
an asset or a liability must be carried at fair value on a companys
balance sheet, with any changes in fair value recorded in a companys
results of operations. It was determined that the Company's warrants
qualify for accounting treatment under ASC 815-40 (formerly EITF 00-19),
"Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, A Company's Own Stock". Under the terms of the
warrant agreements, if the Company fails to deliver the required number of
Warrant Shares, the Company will be obligated to pay cash to settle the
warrant claims. As a result, the Company must assume that it could be
required to settle the warrants on a net-cash basis, thereby necessitating
the treatment of the potential settlement obligation as a liability. The
fair values of the warrants are presented on the accompanying consolidated
balance sheet as Accrued Warrant Liability and the changes in the values
of these warrants are shown in the accompanying consolidated statement of
operations as Decrease in fair value of warrants liability. Such gains
and losses are non-operating and have no effect on cash flows from
operating activities.

(1) Warrants

The Company recognized the share-based compensation cost
based on the grant-date fair value estimated in accordance with ASC 718
(formerly SFAS No. 123R).The Company issued warrants to Anteaus Capital,
Inc., in aggregate, to purchase 277,778 shares of the Companys common
stock in connection with merger related services on May 14, 2007, with an
exercise price of $1.80 per share. These warrants will expire on May 13,
2014 pursuant to the common stock purchase warrant agreement. The Company
used the Black-Scholes option pricing model to determine the fair value of
the stock warrants on May 14, 2007. On May 14, 2007, the fair value was
$3.97 per share, resulting in a share-based compensation totaling
$1,104,166. On November 29, 2007, the Company and Anteaus Capital, Inc.
entered an amendment to the Companys common stock purchase warrants. The
amendment eliminated the clause subject to which if the Company fails to
deliver the required number of Warrant Shares, the Company will be
obligated to pay cash to settle the warrant claims. The 277,778 warrants
issued to Antaeus Capital, Inc. have been re-valued at $1,039,807, and
reclassified to Additional Paid-in Capital from Accrued Warrant Liability.
Other income of $64,359 was recorded to account for the warrants at fair
value.

The fair value for the share-based awards was estimated
using the Black-Scholes option pricing model with the assumptions listed
below:

May 14, 2007

November 29, 2007

Expected volatility

203%

148%

Expected life (years)

7

6.46

Risk free interest rate

4.6%

3.72%

On November 30, 2007, the Company
issued warrants to CCG Investor Relations Partners LLC, in aggregate, to
purchase 50,000 shares of the Companys common stock in connection with investor
relations services, with an exercise price of $5.00 per share. These warrants
will expire on November 29, 2010 pursuant to the common stock purchase warrant
agreement. The fair market value of these stock warrants was $200,105 and was
estimated on the date of grant using the Black-Scholes option-pricing model in
accordance with ASC 718 (formerly SFAS No. 123R) using the following
weighted-average assumptions: expected dividend yield 0%; risk-free interest
rate of 3.08%; volatility of 148% and an expected term of three years.

The expected volatilities are based on
the historical volatility of the Companys stock. The observations were made in
a 52-week period. The expected terms of stock warrants are based on the
remaining contractual life of stock warrants outstanding as these stock warrants
vested immediately.

A summary of stock warrants for the
nine months ended September 30, 2009 is as follows:

Weighted-Average

Weighted-

Remaining

Average

Contractual Term

Stock Warrants

Shares

Exercise Price

(Months)

Outstanding at January
1, 2009

327,778

$

2.29

70

Granted

-

-

-

Exercised or converted

209,723

1.80

-

Forfeited or expired

-

-

-

Outstanding at
September 30, 2009

122,499

$

3.16

38

Exercisable at September 30, 2009

122,499

$

3.16

38

(2) Stock Options

On January 7, 2008, the Company and Mr.
Zhihai Mao, the Chief Financial Officer of the Company, entered into a stock
option agreement. Pursuant to the terms of the stock option agreement, Mr. Mao
was granted a non-qualified option on January 7, 2008 to purchase 200,000 shares
of common stock of the Company at an exercise price of $6.70 per share, which
was the closing price per share of the Companys common stock as reported on the
OTC Bulletin Board on such date. The option has a term of ten years and expires
on January 7, 2018. The option vests in equal installments on a quarterly basis
over a three-year period beginning on January 7, 2008.

On May 1, 2008, the Company entered
into separate Stock Option Agreements with each of Mr. Jay Trien and Dr.Zhonsu
Chen. Under the terms of the Stock Option Agreements, the Company agreed to
grant a stock option to each of Mr. Trien and Dr. Chen for the purchase of
30,000 shares of common stock of the Company at an exercise price of $6.50 per
share, which was the closing price per share of the Companys common stock as
reported on the OTC Bulletin Board on such date. The option has a term of five
years and expires on May 1, 2013. The option vests in equal installments on a
quarterly basis over a three-year period except for 2,500 options vested
immediately on May 1 for Mr. Trien.

On September 28, 2008, the Company
entered into a Stock Option Agreement with Mr. Ho-Ping Lin. Under the terms of
the Stock Option Agreement, the Company agreed to grant a stock option to Mr.
Lin for the purchase of 30,000 shares of common stock of the Company at an
exercise price of $6.50 per share. The option has a term of five years and
expires on September 28, 2013. The option vests in equal installments on a
quarterly basis over a three-year period.

On April 29, 2009, the Board adopted
the 2009 Equity Incentive Plan, which was subsequently approved by shareholders
at the Companys 2009 Annual Shareholder Meeting on May 29, 2009. On June 1,
2009, the Board granted an employee 30,000 stock options with an exercise price
of $5.09, which was the closing price per share of the Companys common stock as
reported on the NASDAQ Stock Market on such date. The options have a term of
five years and expire on June 1, 2014. The options vest in equal installments on
a semi-annual basis over a three-year period. On the same date, the Board voted
to adjust the exercise prices of the stock options which were granted on May 1,
2008 and September 28, 2008 to $5.09 per share and replaced the stock options
granted on January 7, 2008 with 150,000 shares of restricted stocks. The
incremental compensation cost of the re-priced options and replaced restricted
stocks was $26,801, with totaling $8,189 recognized as compensation cost at the
date of re-pricing.

The Company recorded compensation
expense of $181,940 during the nine months ended September 30, 2009 in
connection with the stock options and restricted shares.

The Company estimates the fair value of
stock options using a Black-Scholes option pricing valuation model, consistent
with the provisions of ASC 718 (formerly SFAS 123(R)) and SEC Staff Accounting
Bulletin No. 107, or SAB 107. Key inputs and assumptions used to estimate the
fair value of stock options include the grant price of the award, the expected
option term, volatility of the Companys stock, the risk-free rate and the
Companys dividend yield. Estimates of fair value are not intended to predict
actual future events or the value ultimately realized by grantees, and
subsequent events are not indicative of the reasonableness of the original
estimates of fair value made by the Company.

The fair value of each stock option is
estimated on the date of the grant using the Black-Scholes option pricing model.
No dividends were assumed due to the nature of the Companys current business
strategy. The following table presents the assumptions used for options granted:

Nine Months Ended

Year Ended

September 30, 2009

December 31, 2008

Risk free interest rate

1.65%

2.37-3%

Expected life (year)

3.5

3.5

Expected volatility

82%

30-53%

Weighted average fair value per option

$

2.91

$

0.56-2.76

No options were exercised during the
nine months ended September 30, 2009.

As of September 30, 2009, total
unrecognized compensation costs related to unvested stock options and restricted
shares was $332,052. Unvested stock options are expected to be recognized over a
weighted average period of 1.91 years.

A summary of options transactions
during the nine months ended September 30, 2009 is as follows:

Weighted

Number of

Average

Options

Exercise Price

Outstanding at January 1, 2009

290,000

$

6.6

Granted

30,000

$

5.09

Exercised

-

$

-

Cancelled

(200,000

)

$

6.7

Outstanding at September 30, 2009

120,000

$

6.6

Nonvested as of September 30, 2009

77,500

$

5.09

Option exercisable as of September
30, 2009:

42,500

$

5.09

10.

EQUITY TRANSACTIONS

During the first quarter of 2009, the
Company restructured investments in its Chinese VIE entities, resulting in a
discrepancy of $126,078 in noncontrolling interest. The discrepancy is charged
to Additional Paid-in Capital.

During the nine months ended September
30, 2009, warrants to purchase 209,723 shares of common stock were exercised in
a cashless exercise, resulting in the issuance of 140,675 shares of common
stock.

The Company adopted the provisions of
ASC 740 (formerly FASB Interpretation No. 48), Accounting for Uncertainty in
Income Taxes, on January 1, 2007. As a result of the implementation of
Interpretation 48, the Company recognized no increases or decreases in the total
amounts of previously unrecognized tax benefits. The Company had no unrecognized
tax benefits as of September 30, 2009 and 2008. The Company did not incur any
interest and penalties related to potential underpaid income tax expenses and
also believed that the adoption of FIN 48 does not have a significant impact on
the unrecognized tax benefits during the nine months ended September 30, 2009.

The Company, through its VIE and its
VIEs subsidiaries and affiliates, is governed by the Income Tax Laws of the
PRC. Operations in the United States of America have incurred net accumulated
operating losses of $16,000,000 as of September 30, 2009 for income tax
purposes. However, a hundred percent allowance has been created on the deferred
tax asset of $5,000,000 due to uncertainty of its realization.

For the nine months ended September 30,
2009 and 2008, income tax expenses were as follows:

Nine Months
Ended September 30,

2009

2008

Domestic

Foreign

Domestic

Foreign

Federal

State

China

Federal

State

China

Current

$

109,946

$

-

Deferred

-

49,971

$

109,946

$

49,971

The Group Company, Zhangcheng Media,
Xinjiang Zhangcheng, and Dajian Zhitong are charged at the tax rate at 25% on
the net income for PRC income tax purposes under the new Enterprise Tax Law in
2009. PKU, China TranWiseway, UNISITS, Beijing UNISITS, and Hangzhou UNISITS are
charged at the tax rate at 15% on the net income for PRC income tax purposes in
2009. Beijing Tian Hao and Beijing Zhangcheng qualify as new or high-technology
enterprise located in High-Tech Zones in Beijing, and are entitled to tax
exemptions or preferential tax rates on the net income for PRC income tax
purposes in 2009. Shanghai Yootu and Henan UNISITS are subject to a special rate
at 2.5% of its taxable revenue in 2009.

The Company recognizes deferred tax
assets and liabilities for temporary differences between the financial reporting
and tax bases of its assets and liabilities. Deferred assets are reduced by a
valuation allowance when deemed appropriate.

The tax effects of existing temporary
differences that give rise to significant portions of deferred tax assets at
September 30, 2009 and December 31, 2008 were as follows:

Deferred Tax
Assets

Net operating loss

Valuation

Net deferred tax

carryforwards

allowance

assets

September 30, 2009:

Foreign:

In RMB

¥

1,828,361

¥

-

¥

1,828,361

Exchange rate

0.1467

0.1467

In USD

$

268,221

$

-

$

268,221

Domestic :

In USD

$

5,000,000

$

(5,000,000

)

$

-

December 31, 2008:

Foreign:

In RMB

¥

1,828,361

¥

-

¥

1,828,361

Exchange rate

0.1467

0.1467

In USD

$

268,221

$

-

$

268,221

Domestic :

In USD

$

4,860,000

$

(4,860,000

)

$

-

12.

INCOME PER SHARE

The Company calculates its basic and
diluted earnings per share in accordance with ASC 260 (formerly SFAS No. 128,
Earnings Per Share. Basic earnings per share is calculated by dividing net
income by the weighted average number of common shares outstanding for the
period. Diluted earnings per share is calculated by adjusting the weighted
average outstanding shares to assume conversion of all potentially dilutive
warrants and options include nonvested stock granted to employees. The Company
uses the treasury stock method to reflect the potential dilutive effect of the
unvested stock options and unexercised warrants. In calculating the number of
dilutive shares outstanding, the shares of common stock underlying unvested
stock options are assumed to have been delivered on the grant date.

There was no vacation leave liability for the nine months
ended September 30, 2009.

14.

RELATED-PARTY TRANSACTIONS

Due To Related Parties

As of September 30, 2009, Dajian Zhitong borrowed from
two of its individual shareholders in the aggregated amount of RMB
504,065, or $73,946 for general working capital needs. The borrowings do
not bear interest and are payable on demand.

15.

CONCENTRATION

a.

Cash

The Company maintains cash in US dollars in two
commercial banks located in California. Up to $250,000 of the balance in
each bank was insured by the U.S. Federal Deposit Insurance Corporation
(FDIC). As of September 30, 2009 and December 31, 2008, uninsured balances
totaled $2,026,044 and $1,422,809, respectively.

b.

Major Customers

Revenue

Accounts Receivable

Nine Months Ended September 30,

At September 30,

2009:

During the 3 months
ended September 30, there were no customers that individually represent 10% or more of the Company's total
revenue.

Balances of related after-tax components comprising accumulated
other comprehensive income, included in stockholders' equity, at September 30,
2009 were as follows:

Foreign Currency

Accumulated Other

Translation Adjustment

Comprehensive Income

Balance at January 1,
2008

$

887,184

$

887,184

Change for the year ended December 31,
2008

1,612,709

1,612,709

Balance at January 1,
2009

2,499,893

2,499,893

Change for the nine months ended
September 30, 2009

(388,589

)

(388,589

)

Balance at September
30, 2009

$

2,111,304

$

2,111,304

17.

SEGMENT INFORMATION

ASC 280 (formerly SFAS 131, Disclosures about
Segments of an Enterprise and Related Information) requires companies
to report information about operating segment in interim and annual
financial statements. It also requires segment disclosures about products
and services geographic and major customers. The Company has determined
that it does not have any separately reportable operating
segments.

18.

COMMITMENTS AND CONTINGENCIES

(1) Operating Leases

The Company and its subsidiaries rent
offices under several operating leases. Rent expenses fosr these offices totaled
$257,049 and $ $163,540 for the nine months ended September 30, 2009 and 2008,
respectively. The aggregate future minimum payments under these lease agreements
over one year are as follows:

Year ending September 30,

Lease Commitments

2010

$

1,421,706

2011

1,257,011

2012

1,092,612

Total

$

3,771,329

(2) Acquisition of Shanghai
Yootu

On October 1, 2008, PKU, the Companys
indirectly-owned subsidiary, entered into equity transfer agreements with
shareholders of Shanghai Yootu. Pursuant to the agreement, PKU acquired 100%
ownership of Shanghai Yootu from six individual shareholders. Under the terms of
the Equity Transfer Agreement, PKU will make the payments in three installments
to the Transferors. The initial cash payment of RMB 8.8 million (approximately
$1,300,000) was made in 2008. The second payment, consisting of 50% in cash and
50% in the Companys common stock aggregately equal to twice Shanghai Yootus
2009 net income, will be made by the later of (1) January 1, 2010 or (2) the
completion of the audit of financial statements of Shanghai Yootu for the year
ended December 31, 2009. The final payment, consisting of 50% in cash and 50% in
the Companys common stock aggregately equal to three times Shanghai Yootus
2010 net income, will be made by the later of (1) January 1, 2011 or (2) the
completion of the audit of financial statements of Shanghai Yootu for the year
ended December 31, 2010.

We evaluated all subsequent events from the date of the balance sheet through November 11, 2009, which represent the issuance date of these financial statements. On November 3, 2009, the Companys board of directors granted
non-qualified options under the Companys 2009 Equity Incentive Plan to the Companys employees and consultants to purchase an aggregate 1,791,600 shares of common stock of the Company at an exercise price of $7.69 per share, which was
the closing price per share of the Company's common stock as reported on the NASDAQ on such date. The options have a term of five years and expire on November 3, 2014. The options vest in equal installments on an annual basis over a four-year period
beginning on November 3, 2009.

******

25

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking
Statements

This Quarterly Report on Form 10-Q, including the following
Managements Discussion and Analysis of Financial Condition and Results of
Operations, contains forward-looking statements that are based on the beliefs
of our management, and involve risks and uncertainties, as well as assumptions,
that, if they ever materialize or prove incorrect, could cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. The words believe, expect, anticipate, project, targets,
optimistic, intend, aim, will or similar expressions are intended to
identify forward-looking statements. All statements, other than statements of
historical fact, are statements that could be deemed forward-looking statements,
including statements regarding new and existing products, technologies and
opportunities; statements regarding market and industry segment growth and
demand and acceptance of new and existing products; any projections of sales,
earnings, revenue, margins or other financial items; any statements of the
plans, strategies and objectives of management for future operations; any
statements regarding future economic conditions or performance; uncertainties
related to conducting business in China; and any statements of belief or
intention. As such, they are subject to risks and uncertainties that could cause
our results to differ materially from those expressed or implied by such forward
looking statements. Such risks and uncertainties include any of the factors and
risks mentioned in the Risk Factors sections of our Annual Report on Form 10-K
for the year ended December 31, 2008 and subsequent SEC filings, and any
statements of assumptions underlying any of the foregoing. All forward-looking
statements included in this report are based on information available to us on
the date of this report. We assume no obligation and do not intend to update
these forward-looking statements, except as required by law.

Certain Terms

In this report, unless indicated otherwise, references
to:

China TransInfo, the Company, we, us, or our refer to
the combined business of all of the entities that form our consolidated business
enterprise;

China, Chinese and PRC refer to the Peoples Republic of
China;

BVI refer to the British Virgin Islands;

SEC refer to the United States Securities and Exchange
Commission; Securities Act refer to the Securities Act of 1933, as amended;
Exchange Act refer to the Securities Exchange Act of 1934, as amended; RMB
refer to Renminbi, the legal currency of China; and U.S. dollar, $ and US$
refer to the legal currency of the United States.

Overview of Our Business

We are a leading provider of public transportation information
systems technology and comprehensive solutions in China. Our goal is to become
the largest transportation information product and comprehensive solutions
provider, as well as the largest integrated transportation information platform
and commuter traffic platform builder and operator in China. Substantially all
of our operations are conducted through our variable interest entities that are
PRC domestic companies owned principally or completely by our PRC affiliates.
Through our variable interest entities, we are involved in developing multiple
applications in transportation, digital city, land and resource filling systems
based on Geographic Information Systems, or GIS, technologies that are used to
service the public sector.

We continued to experience strong demand for our products and services during the third quarter of 2009, which resulted in continued growth in our revenues. Despite the overall economic slowdown in the global economy, the transportation information
industry in China is in the process of rapid and continuous development with the continuous increase of Chinese governments and public demand for advanced transportation information products and services to support more effective and efficient
transportation networks in China. This trend is supported by the growing amount of governmental spending in the transportation sector. We believe this trend will continue to result in the growth in sales of our transportation products and
services.

The following are some financial highlights for the third quarter of 2009:

Revenues: Our revenues were approximately $19.17 million for the third quarter of 2009, an increase of 115.02% from the same quarter of last year.

Gross Margin: Gross margin was 38.38% for the third quarter of 2009, as compared to 55.36% for the same period in 2008.

Operating Profit: Operating profit was approximately $4.26 million for the
third quarter of 2009, an increase of 28.00% from $3.33 million of the same
period last year.

Net Income: Net income was approximately $3.98 million for the third
quarter of 2009, an increase of 28.34% from the same period of last year.

Fully diluted earnings per share were $0.18 for the third quarter of 2009.

27

On September 8, 2009, our CEO and President, Mr. Shudong Xia,
entered into an equity transfer agreement, or the Equity Transfer Agreement,
with Unisplendour Corporation Limited, or Unisplendour, pursuant to which Mr. Xia acquired 35.17% of the equity
interest, or the Equity Interest, in Beijing UNISITS Technology Co. Ltd.,
or UNISITS for a cash price
of RMB 44, 400,000 (approximately $6.53 million). Pursuant to the Equity
Transfer Agreement, Mr. Xia paid 50% of the purchase price to Unisplendour
within five (5) business days after the Equity Transfer Agreement became
effective. The remaining 50% of the purchase price will be paid by Mr. Xia
within forty-five (45) days after the completion of registration of Mr. Xia as a
shareholder of UNISITS with the relevant governmental authority in China.

On September 8, 2009, Mr. Xia also entered into an option
agreement, or the Option Agreement with our variable interest entity, China
TransInfo Technology Group Co., Ltd, or the Group Company, pursuant to which, Mr. Xia granted to the Group Company a perpetual
option to purchase all or a part of the Equity Interests at an exercise price of RMB 44,400,000. In exchange, the Group Company agreed to pre-pay to Mr. Xia the
exercise price within 45 business days following the date of the Option
Agreement. In addition, in order to ensure his fulfillment of the obligations
under the Option Agreement, Mr. Xia agreed to pledge the Equity Interest to the
Group Company for five years, or the Term of Pledge. The Group Company may
exercise the option at any time commencing on the day following of the
expiration of the Term of Pledge.

In September 2009, the Group Company and four of five board
directors of UNISITS entered into an Acting in Concert agreement. The
agreement allows the Group Company to govern the financial and operating
policies of UNISITS and therefore to obtain the control of UNISITS. As a result,
UNISITS became a variable interest entity of the Group Company and its
financials have been included in the Companys consolidated financial
statements.

On November 3, 2009, the Companys board of directors granted
non-qualified options under the Companys 2009 Equity Incentive Plan to the
Companys employees and consultants to purchase in aggregate 1,791,600 shares of
common stock of the Company at an exercise price of $7.69 per share, which was
the closing price per share of the Company's common stock as reported on the
NASDAQ on such date. The options have a term of five years and expire on
November 3, 2014. The options vest in equal installments on an annual basis over
a four-year period beginning on November 3, 2009.

28

RESULTS OF OPERATIONS

Three Months Ended September 30, 2009 Compared to Three
Months Ended September 30, 2008

The following table sets forth key components of our results of
operations for the periods indicated, both in dollars and as a percentage of our
revenue.

Three Months
Ended

Three Months
Ended

September
30,

September
30,

2009

2008

Revenues

$

19,165,553

100.00%

$

8,913,514

100.00%

Cost of revenues

11,809,948

61.62%

3,979,049

44.64%

Gross profit

7,355,605

38.38%

4,934,465

55.36%

Expenses:

Selling, general,
and administrative

expenses

3,097,483

16.16%

1,607,712

18.04%

Income from operations

4,258,122

22.22%

3,326,753

37.32%

Other income (expense):

Interest income

18,909

0.10%

23,575

0.26%

Interest expense

(42,038

)

-0.22%

(66,066

)

-0.74%

Subsidy income

188,829

0.99%

305,804

3.43%

Other income - net

52,433

0.27%

4,239

0.05%

Total other
income (expense)

218,133

1.14%

267,552

3.00%

Net income before income taxes and minority interest

4,476,255

23.36%

3,594,305

40.32%

Provision for income taxes

85,864

0.45%

109,864

1.23%

Minority interest

415,114

2.17%

386,900

4.34%

Net income

$

3,975,277

20.74%

$

3,097,541

34.75%

Revenues. Revenues increased approximately $10.26
million, or 115.02%, to approximately $19.17 million for the three months ended
September 30, 2009, from approximately $8.91 million for the same period in
2008. This increase was mainly attributable to the increased sales of our
products and the applications of our products in the Transportation sector
during the third quarter of 2009 compared to the same period in 2008. We believe
that such sales increased as a result of the growing recognition of our brand
name and technology as well as the rapidly developing market opportunities in
the transportation information sector in China.

The following table illustrates the revenues from the major
Chinese government sectors and regulated industries in which we sell our
products and services for the periods indicated. The table also provides the
percentage of total revenues represented by each listed sector.

Three Months Ended September 30, 2009

Percentage
of Total Revenues

Three Months Ended September 30, 2008

Percentage of Total Revenues

Transportation

$

17,385,968

90.71%

$

6,189,493

69.44%

Digital City

778,009

4.06%

2,407,733

27.01%

Land & Resources

984,527

5.14%

316,288

3.55%

Other

17,049

0.09%

0

0.00%

Total

$

19,165,553

100.00%

$

8,913,514

100.00%

As the table above indicates, the Transportation and Digital
City sectors accounted for an aggregate of 94.77% and 96.45% of our sales for
the three months ended September 30, 2009 and 2008, respectively. Sales in Land
& Resources accounted for 5.14% and 3.55% of total sales over each of
periods indicated above.

Cost of Goods Sold. Our cost of goods sold increased
approximately $7.83 million, or 196.80%, to approximately $11.81 million for the
three months ended September 30, 2009, from approximately $3.98 million during
the same period in 2008. This increase was mainly due to the increase in
hardware components and hardware equipment depreciation, which was generally in line with the increase in
our sales. As a percentage of revenues, the cost of goods sold increased to
61.62% during the three moths ended September 30, 2009 from 44.64% in the same
period in 2008.

29

The following table illustrates in detail the items
constituting our costs of goods sold.

Cost Item

Three Months Ended September 30, 2009

Three Months Ended September 30, 2008

Salary

$

314,039

$

284,496

Hardware

9,882,500

1,244,422

Software licenses

831,133

433,588

Outsourcing

37,976

1,675,001

Other

744,300

341,542

Total

$

11,809,948

$

3,979,049

Gross Profit. Our gross profit increased by
approximately $2.43 million, or 49.07%, to approximately $7.36 million for the
three months ended September 30, 2009 from approximately $4.93 million during
the same period in 2008. Gross profit as a percentage of revenues was 38.38% for
the three months ended September 30, 2009, a decrease of 16.98% from 55.36%
during the same period in 2008. Such percentage decrease was mainly due to the
inclusion of the financials of UNISITS whose sales generally involve more
hardware components and have much lower margin than the Companys legacy
business during the three months ended September 30, 2009.

Selling and Marketing Expenses. Majority of our services
and products are sold into the domestic Chinese market through contracts
commissioned by the Chinese government. Various government entities and agencies
either invite us to bid for a specific contract or award a contract to us on a
non-bid basis. This type of procurement process normally accounts for more than
70% of our total sales. We are often invited to bid on contracts through our
professional relationships and are awarded repeat business. Historically, we did
not invest heavily in establishing a substantial marketing program. We promoted
our products by developing relationships through Peking University, professional
relationships with various agencies and municipalities within the Chinese
government and in participation in industry trade exhibitions. Our marketing
expenses therefore were relatively low in comparison to those of our competitors
who do not have a record of performance and brand recognition or
well-established government contacts. Starting from the first quarter of 2009,
we also have enhanced our marketing efforts by organizing various industry trade
exhibitions and conferences in efforts to further promote our corporate image
and brand recognition within the transportation information industry in
China.

Selling and marketing expenses, including sales representative
commissions, promotion fees and marketing expenses increased approximately $0.45
million, or 422.04%, to approximately $0.56 million for the three months ended
September 30, 2009 from approximately $0.11 million during the same period in
2008. As a percentage of revenues, selling expenses increased to 2.93% for the
three months ended September 30, 2009 from 1.21% for the same period in 2008.
Such dollar and percentage increase of selling and marketing expenses was mainly
attributable to our expanded operations and sales volume as well as the enhanced
marketing activities for the three months ended September 30, 2009.

General and Administrative Expenses. Our administrative
expenses were approximately $2.54 million (13.23% of total sales) and
approximately $1.50 million (16.83% of total sales) for the three months ended
September 30, 2009 and 2008, respectively. The dollar increase was mainly due to
the increased staffing and enhanced research and development efforts as well as
more professional expenses associated with being a public company.

Income Taxes. China TransInfo Technology Corp. is
subject to the United States federal income tax at a tax rate of 34%. No
provision for income taxes in the United States has been made as China TransInfo
Technology Corp. had no United States taxable income during the three months
ended September 30, 2009.

30

Our wholly owned subsidiary Cabowise was incorporated in the
BVI and, under the current laws of the BVI, is not subject to income taxes. Our
wholly owned subsidiary Intra-Asia Entertainment Corporation (Delaware) was
incorporated in Delaware. No provision for state income taxes in Delaware has
been made as Intra-Asia
Entertainment Corporation (Delaware) had no Delaware taxable income during the three months ended September 30, 2009. Our wholly owned subsidiary Intra-Asia Entertainment (China) Limited (Hong Kong) was incorporated in Hong Kong and, under the
current laws of Hong Kong, is not subject to income taxes. Our wholly owned subsidiary Intra-Asia Entertainment (Asia-Pacific) Limited (Samoa) was incorporated in Samoa and, under the current laws of Samoa, is not subject to income taxes.

China passed a new Enterprise Income Tax Law, or the New EIT Law, and its implementing rules, both of which became effective on January 1, 2008. Under the New EIT Law, an enterprise established outside of China with de facto management
bodies within China is considered a resident enterprise, meaning that it can be treated in a manner similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de
facto management as substantial and overall management and control over the production and operations, personnel, accounting, and properties of the enterprise.

On April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto
Management Bodies, or the Notice, further interpreting the application of the New EIT Law and its implementation with respect to non-Chinese enterprises or group controlled offshore entities. Pursuant to the Notice, an enterprise incorporated in an
offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a non-domestically incorporated resident enterprise if (i) its senior management in charge of daily operations reside or perform their duties
mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (iv) at
least half of its directors with voting rights or senior management often resident in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when
paying dividends to its non-PRC shareholders. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise incorporated by a Chinese natural person. Nor are detailed measures on imposition of tax from non-domestically
incorporated resident enterprises are available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

We may be deemed to be a resident enterprise by Chinese tax authorities. If the PRC tax authorities determine that the Company is a resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences
could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on financing
proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing rules, dividends paid to us from our VIE Entities would qualify as tax-exempt
income, we cannot guarantee that such dividends will not be subject to withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound
remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new resident enterprise classification could result in a
situation in which a withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares. We are actively monitoring the possibility of resident
enterprise treatment for the 2009 tax year and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible.

If we were treated as a resident enterprise by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be credited against our U.S. tax.

Our VIE Entities, the Group Company, Zhangcheng Media, Xinjiang Zhangcheng, and Dajian Zhitong are charged at the tax rate at 25% on the net income for PRC income tax purposes under the new Enterprise Tax Law in 2009. PKU, China TranWiseway,
UNISITS, Beijing UNISITS, and Hangzhou UNISITS are charged at the tax rate at 15% on the net income for PRC income tax purposes in 2009. Beijing Tian Hao and Beijing Zhangcheng qualify as new or high-technology enterprise located in
High-Tech Zones in Beijing, and are entitled to tax exemptions or preferential tax rates on the net income for PRC income tax purposes in 2009. Shanghai Yootu and Henan UNISITS are subject to a special rate at 2.5% of its taxable revenue in 2009.
For the three months ended September 30, 2008, we incurred income tax expenses of $0.11 million while for the same period in 2009, we incurred income tax expenses of approximately $0.09 million.

31

Net Income. Net income increased by approximately $0.88
million, or 28.34% to approximately $3.98 million for the three months ended
September 30, 2009 from approximately $3.10 million for the same period of 2008,
as a result of the factors described above.

The following table sets forth key components of our results of
operations for the periods indicated, both in dollars and as a percentage of our
revenue.

Nine Months Ended September30,
2009

Nine Months Ended September30,
2008

Revenues

$

35,256,869

100.00%

$

18,685,813

100.00%

Cost of revenues

19,896,690

56.43%

8,258,137

44.19%

Gross profit

15,360,179

43.57%

10,427,676

55.81%

Expenses:

Selling, general,
and

administrative
expenses

6,797,818

19.28%

3,085,992

16.52%

Income from operations

8,562,361

24.29%

7,341,684

39.29%

Other income (expense):

Interest income

51,392

0.15%

50,759

0.27%

Interest expense

(132,027

)

-0.37%

(75,983

)

-0.41%

Subsidy income

308,113

0.87%

305,804

1.64%

Other
income(expense) - net

59,301

0.17%

-

-

Total other income
(expense)

286,779

0.81%

280,580

1.50%

Net income before income taxes and minority interest

8,849,140

25.10%

7,622,264

40.79%

Provision for income taxes

109,946

0.31%

49,971

0.27%

Minority interest

515,588

1.46%

601,691

3.22%

Net income

$

8,223,606

23.32%

$

6,970,602

37.30%

Revenues. Revenues increased approximately $16.57
million, or 88.68%, to approximately $35.26 million for the nine months ended
September 30, 2009, from approximately $18.69 million for the same period in
2008. This increase was mainly attributable to the increased sales of our
products and the applications of our products in the transportation sector
during the nine months ended September 30, 2009 compared to the same period in
2008. We believe that such sales increased as a result of the growing
recognition of our brand name and technology as well as the rapidly developing
market opportunities in the transportation information sector in China.

32

The following table illustrates the revenues from the major
Chinese government sectors and regulated industries in which we sell our
products and services for the periods indicated. The table also provides the
percentage of total revenues represented by each listed sector.

Nine
Months Ended September 30, 2009

Percentage of Total Revenues

Nine
Months Ended September 30, 2008

Percentage of Total Revenues

Transportation

$

28,658,001

81.28%

$

10,862,985

58.14%

Digital City

5,410,966

15.35%

6,023,139

32.23%

Land &
Resources

1,092,385

3.10%

1,761,978

9.43%

Other

95,518

0.27%

37,711

0.20%

Total

$

35,256,869

100.00%

$

18,685,813

100.00%

As the table above indicates, the Transportation and Digital
City sectors accounted for an aggregate of 96.63% and 90.37% of our sales for
the nine months ended September 30, 2009 and 2008, respectively. Sales in Land
& Resources accounted for 3.10% and 9.43% of total sales over each of
periods indicated above.

Cost of Goods Sold. Our cost of goods sold increased
approximately $11.64 million, or 140.93%, to approximately $19.90 million for
the nine months ended September 30, 2009, from approximately $8.26 million
during the same period in 2008. This increase was mainly due to the increase in
hardware components and hardware equipment depreciation, which was generally in
line with the increase in our sales. As a percentage of revenues, the cost of
goods sold increased to 56.43% during the nine moths ended September 30, 2009
from 44.19% in the same period in 2008.

The following table illustrates in detail the items
constituting our costs of goods sold.

Cost Item

Nine Months Ended
September 30, 2009

Nine Months Ended
September 30, 2008

Salary

$

819,633

$

878,303

Hardware

15,714,049

4,215,188

Software licenses

1,499,526

916,594

Outsourcing

368,363

1,785,988

Other

1,495,119

462,064

Total

$

19,896,690

$

8,258,137

Gross Profit. Our gross profit increased by
approximately $4.93 million, or 47.30%, to approximately $15.36 million for the
nine months ended September 30, 2009 from approximately $10.43 million during
the same period in 2008. Gross profit as a percentage of revenues was 43.57% for
the nine months ended September 30, 2009, a decrease of 12.24% from 55.81%
during the same period in 2008. Such percentage decrease was mainly due t
inclusion of the financials of UNISITS whose sales generally involve more
hardware components and have much lower margin than the Companys legacy
business for the nine months ended September 30, 2009.

Selling and Marketing Expenses. Selling and marketing
expenses, including sales representative commissions, promotion fees and
marketing expenses increased approximately $0.69 million, or 128.80%, to
approximately $1.23 million for the nine months ended September 30, 2009 from
approximately $0.54 million during the same period in 2008. As a percentage of
revenues, selling expenses increased to 3.49% for the nine months ended
September 30, 2009 from 2.88% for the same period in 2008. Such dollar and
percentage increase of selling and marketing expenses was mainly attributable to
our expanded operations and sales volume as well as the enhanced marketing
activities for the nine months ended September 30, 2009.

33

General and Administrative Expenses. Our administrative
expenses were approximately $5.57 million (15.79% of total sales) and
approximately $2.55 million (13.64% of total sales) for the nine months ended
September 30, 2009 and 2008, respectively. The dollar and percentage increase
was mainly due to the increased staffing and enhanced research and development
efforts as well as more professional expenses associated with being a public
company.

Income Taxes. For the nine months ended September 30,
2008, we incurred an income tax expense of approximately $0.05 million while for
the same period in 2009, we incurred an income tax expense of approximately
$0.11 million. The increase in the income tax expense mainly resulted from the
income tax paid or accrued with the increased taxable net incomes.

Net Income. Net income increased by approximately $1.25
million, or 17.98% to approximately $8.22 million for the nine months ended
September 30, 2009 from approximately $6.97 million for the same period of 2008,
as a result of the factors described above.

Liquidity and Capital Resources

General

As of September 30, 2009, we had cash and cash equivalents
(excluding restricted cash) of approximately $21.13 million. The following table
provides detailed information about our net cash flow for all financial
statement periods presented in this report.

Cash Flow

Nine Months Ended September 30,

2009

2008

Net cash provided by (used in) operating activities

$

(2,371,396

)

$

1,319,414

Net cash provided
by (used in) investing activities

$

6,495,251

$

(5,374,595

)

Net cash provided by financing activities

$

1,239,295

$

16,006,533

Net cash flow

$

5,003,409

$

12,246,696

Operating Activities

Net cash used in operating activities was approximately $2.37
million for the nine month period ended September 30, 2009, while for the same
period of 2008, we had approximately $1.32 million net cash provided by
operating activities. The increase of the cash used in operating activities was
mainly attributable to the increases in other receivables and cost and estimated
earnings in excess of billings on uncompleted contracts for the nine months
ended September 30, 2009 compared to the same period of 2008.

Investing Activities

Our primary uses of cash for investing activities are payments
for the acquisition of business, property, plant and equipment.

Net cash provided by investing activities for the nine month
period ended September 30, 2009 was approximately $6.50 million, which is an
increase of approximately $11.87 million from net cash used in investing
activities of approximately $5.37 million for the same period of 2008. The
increase of the cash provided by investing activities was mainly due to the cash
acquired from the acquisition of UNISITS.

34

Financing Activities

Net cash provided by financing activities for the nine month period ended September 30, 2009 was approximately $1.24 million, while for the same period of 2008 we had approximately $16.01 million net cash provided by financing activities.
Such change was mainly attributable to the fact that we raised $15 million in the private placement transaction in July 2008

On June 17, 2008, we entered into a short-term loan agreement with Beijing Bank, Youyi Branch, or the Bank, pursuant to which the Bank has agreed to loan to us RMB 20,000,000 (approximately $2.93 million) for working capital purposes. The loan
had an initial annual interest rate of 8.964%, which was floating based on interest rates determined by the Peoples Bank of China from time to time. The interest is payable on a quarterly basis commencing September 20, 2008. The loan expired
on June 17, 2009 and was renewed on June 22, 2009 with an initial interest rate of 5.31% per annum, which is also floating based on interest rates determined by the Peoples Bank of China from time to time. Under the terms of the loan
agreement, we are subject to customary affirmative and negative covenants. The loan may be accelerated and the Bank may demand immediate payment of the principal and accrued interests upon the occurrence of an event of default which includes, among
other things, a failure to make principal or interest payments, a failure to comply with other covenants and certain events of bankruptcy. As of the date of this report, a principal amount of approximately $2.93 million is outstanding. There are
no financial covenants or ratios under this short-term loan agreement.

On September 29, 2009, our VIE entity, Beijing PKU Chinafront High Technology
Co., Ltd., or PKU, entered into a short-term loan agreement with Huaxia Bank, Zhichunlu Branch, or the Huaxia Bank, pursuant to which the Huaxia Bank has agreed to loan to PKU RMB 30,000,000 (approximately $4.40 million)
for working capital purposes. The loan had an initial annual interest rate of 5.31%, which was floating based on interest rates determined by the Peoples Bank of China from time to time. The interest is payable on a monthly basis commencing
October 20, 2009. The loan expires on September 29, 2010. As of the date of this report, a principal amount of approximately $4.40 million is outstanding. There are no financial covenants or ratios under this short-term loan agreement.

We believe that our currently available working capital, after receiving the aggregate proceeds of the bank loans referred to above, should be adequate to sustain our operations at our current levels through at least the next twelve months. However,
depending on our future needs and changes and trends in the capital markets affecting our shares and the Company, we may determine to seek additional equity or debt financing in the private or public markets.

Obligations Under Material Contract

We have entered into a lease agreement to lease office spaces at 8th and 9th floors of Weishi Center, No. 39 Xueyuanlu, Haidian District, Beijing China. Pursuant to this lease, we have the right to use the office space of 5,311
square meters in the Weishi Center from November 1, 2009. We pay a monthly rent (including a monthly property management fee of RMB 258,460) of RMB 605,765 (approximately $88,800) for this facility. We are entitled for one free month rental of
RMB 476,535 (approximately $69,855) per year. This lease expires on October 31, 2012. We intend to move our headquarter and other offices in Beijing to this location by the end of 2009. We expect that we will be able to renew the lease on
similar terms prior to its expiration.

We have entered into a lease agreement with a Chinese individual, Zhao Li, from whom we have leased our current office space at 07 Floor E-Wing Center, No. 113 Zhichunlu, Haidian District, Beijing, China. Pursuant to this lease, we have the right to
use the office space of 517 square meters in the E-Wing Center. We pay a monthly rent of RMB 50,000 (approximately $7,325) for this facility. This lease expires on December 31, 2010 and we intend to terminate it prematurely. On June 2, 2007, we
entered into a real property purchase agreement with Zhao Li, pursuant to which Mr. Zhao agreed to sell the facility to us for a purchase price of RMB
9,747,000 (approximately $1,427,936). In September, 2009, the real property
purchase agreement was verbally terminated by the parties and the prepaid
amounts were returned to us in full.

We also entered into two additional lease agreements to lease office spaces at the 15th and the 16th floors of E-Wing Center, No. 113 Zhichunlu, Haidian District, Beijing, China. Under these two leases, we have the rights to use the office space of
378 square meters at the 15th floor and the office space of 609 square meters at the 16th floor in the E-Wing Center, respectively. We pay monthly rent of RMB 51,011 (approximately $7,473) and RMB 76,783 (approximately $11,249) under these
two lease agreements, respectively. The leases expire on August 31, 2010 and March 30, 2011, respectively. We intend to terminate both leases prematurely.

35

Inflation

Our results of operations have not been affected by inflation and management does not expect that inflation risk would cause material impact on our operations in the future.

Seasonality

Our results of operations are affected by seasonality and we typically see lower sales during the first half than the second half of a year. Such seasonality is mainly caused by governmental seasonal budgeting activities and behaviors.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial
statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of
financial statements, including the following:

On February 3, 2009, the Company, through its indirect Chinese subsidiaries, Oriental Intra-Asia and PKU, entered into a series of equity transfer agreements with China TransInfo Technology Group Co., Ltd., or Group Company, a company incorporated
under Chinese law, pursuant to which the Company transferred all of its indirect equity interests in PKU and PKU's subsidiaries to the Group Company. The main purpose of the restructuring is to allow the Company to engage in three new business
segments, including online services, taxi advertising, and security and surveillance related business in China in which companies with foreign ownership, like the Company and its subsidiaries, are either prohibited or restricted from operating under
the current applicable Chinese laws and regulations. Through the contractual or variable interest entity, or VIE, arrangements, the Company maintains substantial control over the VIE Entities' daily operations and financial affairs, election of
their senior executives and all matters requiring shareholder approval. Furthermore, as the primary beneficiary of the VIE Entities, the Company is entitled to consolidate the financial results of the VIE Entities in its own consolidated financial
statements under FASB Interpretation No. 46R "Consolidation of Variable Interest Entities," or FIN 46R.

In September 2009, the Group Company and four of five board directors of UNISITS entered into an Acting in Concert agreement. The agreement allows the Group Company to govern the financial and operating policies of UNISITS and therefore to obtain
the control of UNISITS. As a result, UNISITS became a variable interest entity of the Group Company and its financials has been included in the Companys consolidated financial statements.

Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include accrued
warranty costs, as well as revenue and costs recorded under the percentage-of-completion method. Actual results could differ from those estimates.

Cash EquivalentsThe Company classifies all highly liquid investments purchased with a maturity of three months or less as cash equivalents.

Accounts ReceivableAccounts receivable are carried at original invoice amount less an estimate for doubtful receivables based on a review of all outstanding amounts at year end. Management determines the allowance for doubtful
accounts by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

36

Allowance for doubtful accounts amounted to $32,395 and $32,439 at September 30, 2009 and December 31, 2008, respectively.

Long-Term Investment The Company uses the cost method of accounting for investments in companies that do not have a readily determinable fair value in which it holds an interest of less than 20% and over which it does not have
the ability to exercise significant influence. For entities in which the Company holds an interest of greater than 20% or in which the Company does have the ability to exercise significant influence, the Company uses the equity method.

Property and EquipmentProperty and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided for using straight-line methods over the estimated useful lives of the respective assets, usually three to
seven years.

Revenue RecognitionMost of the Companys revenues are on contracts recognized using the percentage-of-completion method, measured by the ratio of costs incurred to date to estimated total costs for each contract. Contract
costs include all direct material and labor costs and those indirect costs related to contract performance, such as supplies and travels. General and administrative costs are charged to expense as incurred. Losses on contracts are recorded in full
as they are identified.

For taxi media advertising revenue, the Company recognized deferred revenue when cash is received, but the revenue has not yet been earned. Taxi media advertising revenue is billed to the customer and recognized when the advertisement is published.

Research and DevelopmentResearch and development costs represent the costs of designing, developing and testing products and are expensed as selling, general and administrative expenses as incurred if not meeting capitalization
requirements. Such costs of software projects that successfully passed technological feasibility tests are capitalized and amortized.

Share-Based PaymentsThe Company adopted Statement of Financial Accounting Standards No 123(R), Share-Based Payments, or SFAS No. 123R, effective January 1, 2006. SFAS No. 123R amends existing accounting pronouncements
for share-based payment transactions in which an enterprise receives employee and certain non-employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprises
equity instruments or that may be settled by the issuance of such equity instruments. SFAS No.123R generally requires such transactions be accounted for using a fair-value-based method.

Income TaxesDeferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective income tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is
established against deferred tax assets if it is more likely than not that all, or some portion, of such assets will not be realized.

Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in
their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under FIN 48, tax positions are initially recognized in the financial statements when it is more likely than not the position will be sustained upon
examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full
knowledge of the position and all relevant facts.

Impairment of Long-Lived AssetsThe Company adopts SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". The Company periodically evaluates long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be
recorded to reduce the related asset to its estimated fair value.

The assumptions used by management in determining the future cash flows are critical. In the event these expected cash flows are not realized, future impairment losses may be recorded. Management has determined that no impairments of long-lived
assets currently exist.

37

Issuance of Shares by SubsidiariesSales of stock by a subsidiary is accounted for in accordance with Staff Accounting Bulletin Topic 5H, Accounting for Sales of Stock by a Subsidiary. The Company has adopted the
capital transaction method to account for subsidiary stock sales. Accordingly, increases and decreases in the Companys share of its subsidiarys net equity resulting from subsidiary stock transactions are recorded on the Consolidated
Balance Sheets and Consolidated Statements of Stockholders Equity as increases or decreases to Additional paid-in capital.

Concentrations of Credit RiskFinancial instruments that subject the Company to credit risk consist primarily of accounts receivable, which are concentrated in a small number of customers in the Chinese governments. The Company
performs ongoing credit evaluations of its customers. For the nine months ended September 30, 2009, the Company charged $0 to the bad debt expenses.

Statement of Cash FlowsIn accordance with SFAS No. 95, "Statement of Cash Flows", cash flows from the Company's operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on
the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Translation AdjustmentThe Renminbi, or RMB,, the national currency of the PRC, is the primary currency of the economic environment in which the operations of China IRAE are conducted. The Company uses the United States dollar, or
U.S. dollars, for financial reporting purposes.

In accordance with SFAS No. 52, Foreign Currency Translation, the Companys results of operations and cash flows are translated at the average exchange rates during the period, assets and liabilities are translated at the
exchange rates at the balance sheet dates, and equity is translated at the historical exchange rates. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with
changes in the corresponding balances on the consolidated balance sheets.

As of September 30, 2009 and December 31, 2008, the exchange rates between RMB(¥) and the USD were RMB¥1 = USD$0.1467 and RMB¥1 = USD$0.1467, respectively. The weighted-average rates of exchange between RMB and USD were
RMB¥1 = USD$0.14659 and RMB¥1 = USD$0.14415, respectively. Total translation adjustment recognized as of September 30, 2009 and December 31, 2008 is $2,111,304 and $2,499,893, respectively.

Comprehensive IncomeComprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of stockholders equity.

Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, deposits and accounts payable approximate their fair value because of the short maturity of those instruments.

The carrying amounts of the Company's long-term debt approximate their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on obligations with similar terms.

New Accounting Pronouncements

In June 2009, the FASB issued FAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162, or SFAS No. 168,. The
FASB Accounting Standards Codification, or Codification, will be the single source of authoritative nongovernmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws
are also sources of authoritative GAAP for SEC registrants. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in SFAS 168. All other accounting
literature not included in the Codification is non-authoritative. The Codification is not expected to have a significant impact on our consolidated financial statements.

In December of 2008, the FASB issued FASB Staff Position 132(R)-1, Employers Disclosures about Postretirement Benefit Plan Assets, or FSP FAS 132(R)-1, which provides guidance on an employers disclosures about plan
assets of a defined benefit pension or postretirement plan. FSP FAS 132(R)-1 is effective
for fiscal years beginning after December 15, 2009. FSP FAS 132(R)-1 is not expected to have a material effect on our disclosures.

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Effective June 15, 2009, we adopted FASB Staff Position 107-1, APB 28-1, Interim Disclosures About Fair Value of Financial Instruments, or FSP FAS 107-1, APB 28-1, which requires fair value disclosures in both interim as well as
annual financial statements in order to provide more timely information about the effects of the current market conditions on financial instruments. The adoption of FSP FAS 107-1, APB 28-1 did not have a significant impact on our disclosures.

Effective June 15, 2009, we adopted Statement of Financial Accounting Standards No. 165, Subsequent Events, or SFAS No. 165, which establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 sets forth (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that
may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (3) the
disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Upon adoption, this standard did not have a material effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS 141R, Business Combinations - Revised 2007, which replaces FASB Statement No. 141, Business Combinations. SFAS 141Restablishes principles and requirements intending
to improve the relevance, representational faithfulness, and comparability of information that a reporting entity provides in its financial reports about a business combination and its effects. This is accomplished through requiring the acquirer to
recognize assets acquired and liabilities assumed arising from contractual contingencies as of the acquisition date, measured at their acquisition-date fair values. This includes contractual contingencies only if it is more likely than not that they
meet the definition of an asset of a liability in FASB Concepts Statement No. 6, Elements of Financial Statements - a replacement of FASB Concepts Statement No. 3.This statement also requires the acquirer to
recognized goodwill as of the acquisition date, measured as a residual. However, this statement improves the way in which an acquirers obligations to make payments conditioned on the outcome of future events are recognized and measured, which
in turn improves the measure of goodwill. This statement also defines a bargain purchases as a business combination in which the total acquisition-date fair value of the consideration transferred plus any noncontrolling interest in the acquiree, and
it requires the acquirer to recognize that excess in earnings as a gain attributable to the acquirer. This therefore improves the representational faithfulness and completeness of the information provided about both the acquirers earnings
during the period in which it makes a bargain purchase and the measures of the assets acquired in the bargain purchase. This Statement was adopted by us effective January 1, 2009, and the adoption of this Statement did not have a material impact on
our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Stateme0147nts - an amendment of ARB No. 51,which establishes accounting and reporting standards to improve the relevance,
comparability, and transparency of financial information in its consolidated financial statements. This is accomplished by requiring all entities, except not-for-profit organizations, that prepare consolidated financial statements to (a) clearly
identify, label, and present ownership interests in subsidiaries held by parties other than the parent in the consolidated statement of financial position within equity, but separate from the parents equity, (b) clearly identify and present
both the parents and the noncontrolling interests attributable consolidated net income on the face of the consolidated statement of income, (c) consistently account for changes in parents ownership interest while the parent retains
it controlling financial interest in subsidiary and for all transactions that are economically similar to be accounted for similarly, (d) measure of any gain, loss or retained noncontrolling equity at fair value after a subsidiary is deconsolidated,
and (e) provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This Statement also clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. We adopted SFAS No. 160 effective January 1, 2009, and the adoption of this Statement did not have a material impact on our
consolidated financial statements.

In April 2008, FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets, to provide guidance for determining the useful life of recognized intangible assets and to improve consistency
between the period of expected cash flows used to measure the fair value of a recognized intangible asset and the useful life of the intangible asset as determined under Statement 142. The FSP requires
that an entity consider its own historical experience in renewing or extending similar arrangements. However, the entity must adjust that experience based on entity-specific factors under FASB Statement 142, Goodwill and Other Intangible Assets. The
FSP was adopted by us effective January 1, 2009, and the adoption of the FSP did not have a material impact on our consolidated financial statements.

39

In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Values When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP
provides guidance on (1) estimating the fair value of an asset or liability when the volume and level of activity for the asset or liability have significantly declined and (2) identifying transactions that are not orderly. The FSP also amends
certain disclosure provisions of SFAS No. 157 to require, among other things, disclosures in interim periods of the inputs and valuation techniques used to measure fair value. For the Company, this FSP is effective prospectively beginning April 1,
2009, and the adoption of this FSP did not have a material impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our chief executive officer and chief financial officer, Mr. Shudong Xia and Mr. Zhihai Mao, respectively, evaluated the effectiveness of our disclosure controls and procedures. The term disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports,
such as this report, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including
its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, Mr. Shudong Xia and Mr. Zhihai Mao
concluded that as of September 30, 2009, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective to satisfy the objectives for which
they are intended. Notwithstanding the foregoing, our executive officers noted that information with respect to material agreements or amendments thereto was not identified on a timely basis so as to allow an evaluation as to whether a Current
Report on Form 8-K was required to be filed with respect thereto. Accordingly, our chief executive officer and chief financial officer intend to obtain additional guidance and/or training with respect to the circumstances and events which require
the filing of a Current Report on Form 8-K and intend to implement a new internal policy that will allow management to timely identify material agreements and amendments thereto that require the filing of a Current Report on Form 8-K as necessary.

Changes in Internal Control Over Financial Reporting.

During the fiscal quarter ended September 30, 2009, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

40

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. We are currently not aware of any legal proceedings or claims that would require disclosure under Item 103 of
Regulation S-K. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any unregistered equity securities during the fiscal quarter ended September 30, 2009 that were not previously disclosed in a current report on Form 8-K that was filed during that period.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

On September 29, 2009, our VIE entity, PKU, entered into a Short-term Loan Agreement, with Huaxia Bank, pursuant to which Huaxia Bank has agreed to loan to PKU RMB 30,000,000
(approximately $4.40 million) for working capital purposes. The loan had an initial annual interest rate of 5.31%, which was floating based on interest rates determined by the Peoples Bank of China from time to time. The interest is
payable on a monthly basis commencing October 20, 2009. The loan expires on September 29, 2010. Under the terms of the loan agreement, PKU is subject to customary affirmative and negative covenants. The loan may be accelerated and
Huaxia Bank may
demand immediate payment of the principal and accrued interests upon the occurrence of an event of default which includes, among other things, a failure to make principal or interest payments, a failure to comply with other covenants and certain
events of bankruptcy. As of the date of this report, a principal amount of approximately $4.40 million is outstanding. There are no financial covenants or ratios under this short-term loan agreement.

On August 18, 2009, the Group Company entered into a lease agreement, or the Lease Agreement, with Beijing Weishi Hotel Management Co. Ltd., or Beijing Weishi, to lease office spaces at 8th and 9th floors of Weishi Center, No.
39 Xueyuanlu, Haidian District, Beijing China. Pursuant to the Lease Agreement, the Group Company has the right to use the office space of 5,311 square meters in the Weishi Center from November 1, 2009 to October 31, 2012. The Group Company pays a
monthly rent (including a monthly property management fee of RMB 258,460) of RMB 605,765 (approximately $88,800) for this facility. Upon the entry into the Lease Agreement, the Group Company paid Beijing Weishi a refundable deposit in an amount of RMB 1,817,295 (approximately $267,250). The Group Company is entitled for one free month rental of RMB 476,535 (approximately $69,855) per year. This lease expires on October 31, 2012. We expect that we will be able to renew the lease on
similar terms prior to its expiration.

In September 2009, the Group Company and four of five board members of UNISITS (including two directors who are also directors of the Company) entered into an Acting in Concert Agreement. Under the Acting in Concert Agreement, four directors of
UNISITS agreed, during an initial term of four years, to act in concert with the Group Company in connection with the management, operations and appointment of directors and officers of UNISITS and therefore to obtain the control of UNISITS.

The foregoing description does not purport to be a complete statement of the parties rights and obligations under the agreements or the transactions contemplated thereby or a complete explanation of the materials thereof. The foregoing
description is qualified in its entirety by reference to the English Translation of the Short-term Loan Agreement, the English Translation of Lease Agreement and the English Translation of Acting in Concert Agreement attached hereto as Exhibits
10.1, 10.2, and 10.3, respectively.

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